Making its nationwide debut is the Sprout card, a cashless payment option integrated with a comprehensive marketing program that offers consumers incentives to shop at their vending machines. Adopted by the Vend Marketing Institute (Louisville, KY) for its nationwide operations, Sprout's loyalty and rewards programs are designed to help operators and manufacturers connect more effectively with their customers. The system already is producing good results in its initial locations.

"Vending customers can actually buy a product on sale, just like they're accustomed to at retail," explained Jim English, chief executive of Sprout Retail Inc. (Bridgewater, NJ). "It's like a 'frequent shopper' card that you use at the supermarket or drugstore, but for vending. The card is a vehicle to let the supplier have a relationship with the consumer that's agnostic to the retail point of sale."

English launched Sprout in 2009 with the goal of harnessing wireless technology in new ways to deliver unprecedented value for vending operators and customers. Before establishing Sprout, he had served as general manager of vending for Mars US Snackfoods and as a consultant and executive in the consumer products industry.

"Our goal is for the operator to 'pull' product through the machine, not stock it and hope it sells through," English emphasized. "We're trying to increase consumer demand rather than just 'pushing' product into the channel, increasing loyalty by giving the consumer reason to return."

The program's launch builds on a foundation of operational procedures and technological initiatives developed by Sprout and refined, with the company's assistance, by its partners at the Vend Marketing Institute (Louisville, KY) over the past 18 months. VMI, a consortium of 17 operators formed seven years ago as a buying cooperative, is the first base of operating companies to harness Sprout's end-to-end system. Its network includes over 85,000 individual vending machines, along with more than 200 foodservice facilities. This network offers the scope to transform vending into a consumer-centric model competitive in the retail world.

"For the operator today, it's really important for the bottom line to think like a retailer," stressed English. "You have to put the consumer first, and tighten control of operations. Sprout's mission is to change the top- and bottom-line business, and to provide a platform for VMI to go from a buying group to being a marketing group. We've taken the best retail practices over the past 10 years and applied them to vending. With the launch of the Sprout card, we can now fully leverage all that's there."

The benefits to patrons using Sprout are multifaceted, from the convenience of cashless payment to the loyalty program through which each dollar they spend earns them five points that they can redeem for free product and other premiums from participating manufacturers, or in some cases, value added back onto their cards.

"Part of the magic of the loyalty program is that the company funds the loyalty," explained English. "Coke provides a free soda, for example, if the customer bought 10 Cokes."

Sprout cardholders also can enjoy recurrent limited-time promotions, such as reduced prices or discounts for buying more than one of a specified item.

Initially, Sprout plans to run the same promotions simultaneously across a network of machines. English explained that the program also can be tailored to a single location, one machine or specific consumers -- for example, by running a promotion targeting only consumers who have not patronized a machine within a month, to encourage them to return.

There's also a charitable component to the Sprout program. One and a half percent of every purchase is donated by the operator to a charity of the customer's choice. The charitable contribution, along with the many cardholder benefits, are provided in lieu of commission payments.

Sprout cardholders designate their charity of choice from a list on the Sprout website when they set up their accounts. This aspect of the program is modeled on the Heartland Give Something Back Network, a campus ID and stored value card created by the Princeton, NJ-based payment processor three years ago.

"Most people would like to give something back, but don't have the time," explained Ron Farmer, Heartland Payment Systems' executive director of campus solutions and micropayments, which proces­ses Sprout's transactions. "The Sprout program allows them to be charitable every time buy a candy bar."

Central National Bank (Enid, OK) issues the cards, and Sprout developed its own software to manage the loyalty and promotional functions.

Patrons can add value to their cards by using a credit or debit card, coins or cash, or by transferring funds directly from their checking or payroll accounts through their accounts on the Sprout website.

Also revolutionary is the ability Sprout gives patrons to interact with machines at their sites and manage their accounts from their computers. Sprout customers can log onto their accounts, click on the icon of any vender to view its planogram, and leave feedback and make product requests. They also can pull up existing planograms and nutritional information, flag products that meet VMI's "healthier" Right Choice criteria and view nutritional information for each product. Additionally, their reward points and account balances are available online.

Operators publicize Sprout's launch through special events held about two weeks before the program goes live, at which they describe the program, show a video (online at sproutretail.com), demonstrate how to use the card, enroll customers (using laptop computers) and distribute free product samples. In some inaugural VMI sites, the operators and clients have agreed to load a nominal introductory value onto new members' cards to encourage them to sign up and help them become accustomed to the system.

Once enrolled, cardholders are kept up to date on the latest promotions through weekly emails, static-cling transparencies on machines and signage posted throughout the workplace.

Sprout's benefits to suppliers are equally attractive; they gain a wealth of market data and a tool for becoming better attuned to the end-user. "It ties the vending industry into the capture of market intelligence," said English. "All the key vending suppliers are on board with the program and everyone wins -- the operator, the supplier and Sprout -- by the ability to drive more demand through promotions. We know, up to the minute, what's selling and what's not. and we can give them transparent line-item sales data."

VMI executive director Chris Stave pointed out that an enormous advantage the Sprout card gives suppliers is its ability to track the personal buying habits of each consumer. When a patron swipes a conventional credit or debit card at a vending machine to make a purchase, he explained, the operator knows only that a payment was made -- not who made it. With the server-based Sprout system, when the customer swipes the card, the system records the purchaser and the purchase, reconciles the transaction and applies any applicable awards.

"This is the first time the industry can associate an item purchased with the person who purchases it, and offer a direct incentive or reward," Stave explained. "It's just like the loyalty cards in a supermarket; they can only know about you once you sign up, and then they learn a lot."

Vending has always been an ideal test medium for manufacturers to gauge consumer response to limited product runs, and Sprout makes this channel even more valuable, continued Stave. The program allows a supplier to roll out a new product at a discounted price for a specified period of time. The marketers can track the number of consumers who buy it once, and then see how many return to purchase it again at full price. "There are a million other ways we can help manufacturers gain marketing insights on a customer-by-customer, machine-by-machine basis," he emphasized.

Sprout is also refining the decades-old industry model under which manufacturers offer operators rebates based on product purchases. This approach necessarily "pushes" certain products to consumers, without regard for their actual purchasing habits. At retail, by contrast, stores typically receive rebates based on products sold, as recorded by the register.

Sprout follows the retail model, Stave explained. Similarly, if the deal is that the patron who buys one Mountain Dew gets one free, for instance, the supplier provides the free product, after the initial sale.

"In the past, the vending industry didn't know whether a product was moving. Now we're smarter; we have the data to know," said Stave. "If it's a slow mover, we have the choice to pull it or to discount it through Sprout. Maybe it's an LSS bag priced at 80¢ and we'll try it for 50¢. We'll see if we get additional trials to get the volume and maybe it will become viable. It gives us the flexibility to really, truly become marketers."

The VMI director said that the vending industry, in recent decades, has been held back by its adherence to the ancient rule, "set it and forget it." Sprout's modern alternative is to set up each machine on the basis of the account's demographics, and then evolve to keep pace with what that specific local client base wants to buy.

"It's a good starting point to get Nielsen data on the top candies and snacks in the Cleveland market," Stave continued. "But, of course, we're not serving all of Cleveland; we're serving an insurance office with 100 employees, so we have to evolve what we offer. If you like Diet Dr Pepper and you buy one can a day, you may make it a top seller in the machine if I put it in. Learning that data and acting on it is what Sprout is all about."

Treat America (Merriam, KS) is one of the first VMI companies to deploy the Sprout system, and had it up and running since September at approximately 20 accounts in the four markets in which it operates: Kansas City (KS and MO), Omaha, NE, Des Moines, IA, and Indianapolis.

"It's early to provide a quantifiable metric, but technically, it's working very well. It's been very well received by clients," Treat America president John Mitchell told VT. "They appreciate the value component and the convenience of cashless for their employees, and many are very enthusiastic about supporting a charitable cause through their vending program. It's absolutely helped us sell new accounts.

"We see it as a huge opportunity for the industry to reengage the consumer and provide value and rewards by doing a better job of getting consumers what they want," he told VT.

In Mitchell's view, from an economic standpoint, cashless payment alone is not a winning proposition in most locations at present. But since Sprout requires the same infrastructure as credit and debit cards and can be offered alongside them, he is confident that its ability to drive sales and satisfaction will help offset the ongoing costs of processing more costly transactions. "I believe the loyalty promotions are a big home run, and the 'closed' Sprout payment system has the ability make it more affordable," said the Treat America president. "We don't make money off the payments; there's no charge to load money or maintain the card. For the operator, it's more favorable than standard credit card fees."

Another VMI affiliate, Imperial Co. (Tulsa, OK), is poised to launch the Sprout program this month at three accounts served by the firm's multi-state operation (Oklahoma, Texas and Arkansas).

"We're getting great feedback from our existing customers who are repeat buyers; there's a big customer loyalty component," Whorton reported. "We're excited about making the vending experience more interactive by connecting with consumers online, and having the ability to e-mail them special offers. We're very excited about the possibilities of the Sprout card to benefit end-users and manufacturers, which ultimately benefits the operator."

Whorton noted that, just as with credit card acceptance, it will likely take some time, experience and fine-tuning along the way to determine the ideal locations for Sprout, and the best implementation of its many benefits.

LAYING THE GROUNDWORK

VMI's Stave said the organization's approach in the early stages is to target the rollout to offices, industrial sites and corporate campuses with 300 to 1,000 people.

"We're still on a micro number of locations; it will have a larger rollout over the next few months, beginning with 10 to 20 more installations in December," he told VT. "We are still testing the program and talking to customers; we're arranging more deals with suppliers. Some of these are very simple -- simply half price. Others may be 'buy four items, get the fifth one free.' We have to see how it works. Some deals may be too complicated; or they may not be. It will all progress gradually and carefully. We've worked hand in hand with Sprout from the beginning, and we'll continue to do so."

Stave added that VMI has been working with Crane Streamware, MEI and Cantaloupe to achieve seamless integration between their respective vending management systems and Sprout, and is making steady progress. They are also beginning to work toward integration with other service providers. Until full integration is achieved, Stave said, a limited amount of manual data entry still is required.

For the past 18 months, Sprout has been actively deploying Cantaloupe's wireless technology across the VMI network; English emphasized that this is the baseline upon which his company's vending model is built. He said the group's first use of the technology was in improving route efficiencies, up to established benchmarks. As a result, the number of VMI members' routes has reportedly dropped by 35% to 50%. VMI currently has some 28,000 machines equipped with the wireless technology, the industry veteran added.

The next step, still in progress, is to enable every machine in the VMI network for cashless payment. Cashless vending capability, encompassing credit, debit and Sprout media, "went live" in all equipped machines when Cantaloupe attained compliance with Payment Card Industry (PCI) standards in September.

The final implementation phase involves leveraging all the DEX machine audit data now available and the Sprout system's capabilities, to shift to dynamic merchandising. This includes enhancing freshness and variety, and steadily augmenting sales by tailoring each machine to its patron base while improving efficiencies in the warehouse through prekitting. "We've seen double-digit growth by doubling up on the best sellers and getting out the slow-moving products," Stave told VT.

"Sprout gives operators a much different value proposition. They're not hoping to win only on service," English summed up. "They're walking in with a dramatic point of difference, to win the right business away from their competitors. A big part of our success is based on structures, controls and operational discipline, and we're finding pent-up demand for our customer-centric approach."

In English's view, few operators get the full benefit of wireless in isolation, and most don't have the ability to market and merchandise like true retailers. "We took 17 good operators in VMI and figured out how to do it together; it took a lot of putting together the heads of some of the most successful people in vending," he said. "No one supplier can do all we've done. We've created partnerships with the best suppliers out there, developed in-house programs and worked in conjunction with other solution providers. All VMI operators adopt the Sprout platform, operating like one big company but with separate ownership structures."

English said Sprout is open to operators outside of VMI, provided they meet the high benchmarks he has established to qualify as licensees.